But, when you are a doctor, you are not looking at the budget housing that will be paid off in 2-3 years. Rather, you are looking at million dollar downtown condos, luxury designer houses, or that lake house in that exclusive golf community. Everyone does the same thing, at their own income level.
Not necessarily, I know many doctors who do not live in the most lavish communities. Many do but even then they can pay it off in a fraction of the time it would take us (me Engineer).
So interest is ok if you can pay it of in a 2 or 3 years as opposed to 15 to 30 years? Good work around.
BTW I hope people realize that there are laws that protect the poor if they fall into a bad economic situation and cannot repay the housing loan. I am not 100% sure of this but I recall something about basic necessities (including home) cannot be taken away from somebody who is forced into bankruptcy.
Somebody with law/accounting background can better clarify this
The Islamic mortgage is just a sugar coated form of your regular mortgage...
i had the similar exp.. its just not called 'interest' but taken in the name of something else.. like their expenditures or something.. and u even get a tax credit on it. just like conventional loans..
One question to all those of you who are so vocal against interest ...
"I need one 50,000 dollars. I will repay the amoun after 10 years. Are you willing to lend me this money without interest"
Interestingly once such question was put to Mr. Yousuf Ludhianwi in Jang some 10 years back. The question was something like this. Someone took a loan from somedbody some 10 years ago then. The borrower was able to pay the loan after 10 years but he was insisting the lender to take the equivalent Pak rupees at the rate of previaling rate of exchange i.e if a dollar costed some 20 rupees then, he would pay back at the present day dollar rate in Pak Rs.
The confused YL gave his fatwa that the lender should accept the borrower's proposal - so in a twisted way he made interest halal!
Yes they will seize your assets but will not make u slave generation after generation. But in the primitive time, this was the case.
Maybe here and there not widespread. Every lender had a different theme or coercion. There was no such blanket practice. Interestingly we are already enslaved by the debt owed by our countries, so how is that any different. We cannot decide independently in our own matters.
Interestingly once such question was put to Mr. Yousuf Ludhianwi in Jang some 10 years back. The question was something like this. Someone took a loan from somedbody some 10 years ago then. The borrower was able to pay the loan after 10 years but he was insisting the lender to take the equivalent Pak rupees at the rate of previaling rate of exchange i.e if a dollar costed some 20 rupees then, he would pay back at the present day dollar rate in Pak Rs.
The confused YL gave his fatwa that the lender should accept the borrower's proposal - so in a twisted way he made interest halal!
This is not interest IMO, governments release data which would tell you how much a dollar 10 years ago is worth today and IMO that is what should be returned. I discussed this before in this thread. When you borrow paper money, its not the money that is worth anything, what you are borrowing is a certain purchasing power and that is what should be returned. Paper money should be understood and not compared to things whose instrinsic value does not change. If I borrowed $1000 today and had to return it 10 years later I would return an amount with an equivalent purchase power of what the $1000 had 10 years ago.
^ that would actually simplify matters a lot for muslims. however it is impossible to implement.
1/1/2001 = $1000 can buy 1 computer
1/1/2008 = $1000 can buy 2 computers
1/1/2001 = $1000 can buy 50 sacks of grain
1/1/2008 = $1000 can buy 30 sacks of grain
Now what is the purchasing power that would be used?
If I borrowed money then I should just return the equivalent purchase power. If I borrowed it for the purpose of purchasing a commodity then I should be returning the same purchase power for that commodity.
If I borrowed money then I should just return the equivalent purchase power. If I borrowed it for the purpose of purchasing a commodity then I should be returning the same purchase power for that commodity.
So it I would be returning like:
$500
$1666.66
This is very crass estimate ofcourse.
That's exactly why I think it is impossible to implement because it requires the creditor to track what the borrower is borrowing for, how the prices of what borrower bought with th emoney are tracking etc. What's worst, if the borrower is borrowing to buy a computer and so will return only $500, the creditor may want to buy grain in 2008 and ends up getting less than a third of what he lent out.
In other words, the purchasing power of a $ is not the same for the creditor and debtor.
That's exactly why I think it is impossible to implement because it requires the creditor to track what the borrower is borrowing for, how the prices of what borrower bought with th emoney are tracking etc. What's worst, if the borrower is borrowing to buy a computer and so will return only $500, the creditor may want to buy grain in 2008 and ends up getting less than a third of what he lent out.
In other words, the purchasing power of a $ is not the same for the creditor and debtor.
How will that be handled?
Good question. I don't have the best answer for it but I think the purchase power of currency is or should be leveled against a more stable commodity. Isn't GDP such a measure? GDP plays a big part in the valuation of a countries currency. It used to be gold but gold is hardly considered a substantial portion of a countries wealth anymore. What I don't know is what is that benchmark against which the valuation of currency should be tracked from one period of time to another. Now just to be clear we are only talking loans here not sales.
^ GDP cannot fully and fairly determine purchasing power either, since income levels, type of commodity classes etc have to be taken into account. And once you go through all that what you will find is that changes in 'value' of money is again nothing else but good old supply and demand.
When something is in demand what do you do, to get it? you have to pay a price.
Good question. I don't have the best answer for it but I think the purchase power of currency is or should be leveled against a more stable commodity. Isn't GDP such a measure? GDP plays a big part in the valuation of a countries currency. It used to be gold but gold is hardly considered a substantial portion of a countries wealth anymore. What I don't know is what is that benchmark against which the valuation of currency should be tracked from one period of time to another. Now just to be clear we are only talking loans here not sales.
USResdient bro
Assalamu'alaikum
Perhaps 'Oil' is a better standard today? Also, I don't think it is as simple as the calculations as above with regards to purchasing power.
Say in 1990 Xavier borrowed $5000 from Yasmin
Therefore in 1990 X owes Y $5000
By 1991 the inflation change - not significant and $100 have been given back every month.
Taking the total to $3800 to return.
By 1992 the inflation change +3% so the amount being paid back needs to change from $100 to $103 per month to maintain the same purchase power return on a monthly basis to keep the timeline for payback in sync and prevent the contract from alteration. This now takes the total to $3914 - $1236 = $2678... $3800 x 1.03 = $3914; $1200 x 1.03 = $1236
By 1993 the inflation goes -1% so payback is 12 x 103 x 0.99 = $1223.64; $101.97 per month on a total remaining to $3874.86 ... After deductions we get - $2651.22
By 1994, +3% infl, Total to pay = $2730.76, Total paid = $1260.36, Total remaining = $1470.40
By 1995, -2% infl, Total to pay = $1440.99, Total paid = $1235.15, Total remaining = $205.84
By 1996, +4% infl, Total to pay = $214.07, Total paid = $214.07
In the 6 years it took to pay back the amount the inflation overall rose 0+3-1+3-2+4 = +7%
So according to the initial assumption the payback would be $5000 x 1.07 = $5350.
But now lets add all the yearly totals paid back.
The problem is the inflation rate has never gone down below the initial amount throughout those 6 years. Relative changes took it from 0 - 3 - 2 - 5 - 3 - 7. Which means the calculation is a lot more difficult than we think. This is only on the yearly level. If the money is being paid back monthly the inflation should really be re-calculated for each payment of the installment. On an interest basis the final returned money amounts to ($6369/$5000) ^ (1/6) = 1.0411 ~ 4.11% interest APR.
If we are not indulging in riba we are convered in its dust.
Perhaps 'Oil' is a better standard today? Also, I don't think it is as simple as the calculations as above with regards to purchasing power.
Say in 1990 Xavier borrowed $5000 from Yasmin
Therefore in 1990 X owes Y $5000
By 1991 the inflation change - not significant and $100 have been given back every month.
Taking the total to $3800 to return.
By 1992 the inflation change +3% so the amount being paid back needs to change from $100 to $103 per month to maintain the same purchase power return on a monthly basis to keep the timeline for payback in sync and prevent the contract from alteration. This now takes the total to $3914 - $1236 = $2678... $3800 x 1.03 = $3914; $1200 x 1.03 = $1236
By 1993 the inflation goes -1% so payback is 12 x 103 x 0.99 = $1223.64; $101.97 per month on a total remaining to $3874.86 ... After deductions we get - $2651.22
By 1994, +3% infl, Total to pay = $2730.76, Total paid = $1260.36, Total remaining = $1470.40
By 1995, -2% infl, Total to pay = $1440.99, Total paid = $1235.15, Total remaining = $205.84
By 1996, +4% infl, Total to pay = $214.07, Total paid = $214.07
In the 6 years it took to pay back the amount the inflation overall rose 0+3-1+3-2+4 = +7%
So according to the initial assumption the payback would be $5000 x 1.07 = $5350.
But now lets add all the yearly totals paid back.
The problem is the inflation rate has never gone down below the initial amount throughout those 6 years. Relative changes took it from 0 - 3 - 2 - 5 - 3 - 7. Which means the calculation is a lot more difficult than we think. This is only on the yearly level. If the money is being paid back monthly the inflation should really be re-calculated for each payment of the installment. On an interest basis the final returned money amounts to ($6369/$5000) ^ (1/6) = 1.0411 ~ 4.11% interest APR.
If we are not indulging in riba we are convered in its dust.
Nice post bro and I agree with it. I never said paper money is not defect free but yes as you have put it, we are covered in dust. The question is how acceptable is that dust. Is it there out of necessity given the complexity of todays transactions and huge population or it can be avoided altogether. It might be easy to say it can be avoided altogether but it would be just as difficult to come up with a model that satisfies all requirements given todays complexity.